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Real estate markets for the richest 1% are "leveling off"

Lawrence Lewitinn
Lawrence Lewitinn

Manhattan luxury real estate may have hit record numbers in the first quarter of 2016 but other housing markets favored by America’s richest 1% are having a shaky start to the year, according to newly-released data compiled by appraisers Miller Samuel and brokerage firm Douglas Elliman.

“The housing market in general is softer at the top than it is in the middle and lower parts of the market, perhaps because they peaked sooner,” said Jonathan Miller, president and CEO of Miller Samuel. “The last four or five years have all been about the luxury market. Now we're leveling off a bit.”

The Hamptons, NY, and Greenwich, CT

“Those two housing markets are both linked at the hip with Wall Street,” said Miller. “But they're performing very differently and the markets are very different.”

The Hamptons are a series of villages on the eastern end of Long Island. Although nearly 100 miles from Manhattan, many of New York’s very wealthy brave several hours of bumper-to-bumper traffic the entire way there during the summer months. Once at their vacation homes, they then find their favorite restaurants are booked up for weeks in advance.

Every year, hundreds of people pay millions of dollars for this experience. The average sale price in the first quarter of 2016 for a home in the Hamptons was nearly $1.9 million, a 7.4% increase over last year but 20.6% off from the previous quarter.

Homes in the top 10% of that market saw the same pattern of a huge drop compared to the last quarter of 2015 but a decent increase over the same time last year. The average sale price in the upper tenth of the Hamptons' market was $8.8 million for Q1, almost 40 times the average American home sale price of $222,700.

The Hamptons luxury market (highest 10% of all sales)

 

2016 Q1

% change (quarter)

2015 Q4

% change (year)

2015 Q1

Average sales price

$8,811,964

-28.4%

$12,300,965

11.6%

$7,898,649

Median sales price

$5,500,000

-33.7%

$8,300,000

0%

$5,500,000

Number of sales

45

-27.4%

62

-19.6%

56

Entry threshold

$4,050,00

-19.0%

$5,000,000

11.0%

$3,650,000

 Source: The Elliman Report, Miller Samuel

“It's fared surprisingly well,” Miller said of the Hamptons. “Especially over the last year or two, we've had very high and a lot of activity. It's cooling off a little bit. We're going to probably see a more modest market behavior in this coming year rather than what we saw last year.”

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But Greenwich, CT, a major hedge fund center located just 30 miles from Manhattan, is seeing the opposite move, even as transactions and housing inventory continue to rise.

Prices are higher from 2015 Q4 but lower compared to Q1 of that year. The average price for a single family house in Greenwich, where everyone from Steven A. Cohen to Ray Dalio call home, is $2.3 million, a 9.9% increase from the previous quarter, though a 12.4% drop from last year.

The upper 10% – sales above $4.075 million – are seeing an average close to $6.7 million, a healthy increase from $5.15 million from the fall but well below the $8.5 million average in the first three months of 2015.

Greenwich, CT luxury market (highest 10% of all sales)

 

2016 Q1

% change (quarter)

2015 Q4

% change (year)

2015 Q1

Average sales price

$6,654,965

29.3%

$5,147,750

-22.0%

$8,534,615

Median sales price

$5,445,000

22.4%

$4,450,00

-4.1%

$5,675,000

Number of sales

14

-22.2%

18

7.7%

13

Entry threshold

$4,075,000

10.9%

$3,675,000

-0.6%

$4,100,000

Source: The Elliman Report, Miller Samuel

“Greenwich still is anchored to pre-Lehman days where we're seeing a lot of weakness and not a lot of price growth,” Miller said. “Certainly growing activity, but we're just not seeing the behavior that you're seeing in the city in terms of rising prices and sales activity.”

Aspen, CO

Those with money who want to hit the slopes but don’t have the patience for St. Moritz can instead opt for Aspen. It’s where billionaires like David Geffen and Michael Dell have homes.

On the surface, things are going terribly for Aspen’s real estate market. The average sale price is $2.7 million, down 35% from Q4 of 2015 and 33.9% from Q1 of last year.

The top 10% saw steeper drops, with the average of the mere six traded came in at $8.6 million, almost 42% lower than last year on the same amount of volume. Even Bill Koch seems to be feeling the heat; he recently cut the asking price of his retreat from $100 million to the bargain-basement price of just $80 million. But Miller isn’t sweating just yet and sees this as typical of Aspen’s choppy real estate market.

Aspen, CO luxury market (highest 10% of all sales)

 

2016 Q1

% change (quarter)

2015 Q4

% change (year)

2015 Q1

Average sales price

$8,587,576

-49.3%

$16,929,375

-41.8%

$14,758,333

Median sales price

$8,080,00

-47.9%

$15,500,000

-42.7%

$14,100,000

Number of sales

6

-25.0%

8

0%

6

Entry threshold

$5,500,000

-31.3%

$8,000,000

-45.0%

$10,000,000

Source: The Elliman Report, Miller Samuel

“For about one quarter a year for the last four or five years, we've seen the top of the market go quiet for a quarter and then restart,” said Miller, whose partner in the report, Douglas Elliman, is Koch’s listing broker. “That's what happened here. The average size of a home sale in Aspen fell about 40%, so that drives prices lower.”

Miller points out that the price per square foot of all transactions in Aspen came in at $1,454, a 5.6% increase from last year and the second-highest number ever recorded for the town.

“We are seeing price growth,” he said. “It just depends on the quarter in terms of what sales activity actually occurs.”

Westside and Downtown Los Angeles, CA

The 1% are doing decisively better on the West Coast, if Los Angeles’ Westside and Downtown luxury market is any indication. Miller characterizes it as “one of the strongest high-end markets in the country. What you're seeing across all the price metrics: record numbers ... It clearly is outperforming many other markets in the country.”

Westside & Downtown luxury market (highest 10% of all sales)

Single-family homes

2016 Q1

% change (quarter)

2015 Q4

% change (year)

2015 Q1

Average sales price

$7,012,712

-3.4%

$7,258,009

4.9%

$6,683,493

Median sales price

$5,912,500

6.8%

$5,537,500

20.1%

$4,925,000

Number of sales

118

-14.5%

138

0%

118

Entry threshold

$3,908,787

9.5%

$3,569,000

11.7%

$3,500,000

Source: The Elliman Report, Miller Samuel

The entertainment capital of the world is seeing “a modest uptick in inventory,” Miller said. “That's as a result of higher prices pulling more product onto the market. It's a very it's a booming local economy.”

As for the overall luxury market, Miller maintains it comes down to the three main factors that matter most in all real estate: location, location, location.

“After a burst of activity over the last four or five years, I think we're going to see a high-end market that's really going to move sideways,” he said. “Certain markets are going to see a slowdown, others aren't. The thing to think about is the high-end market is it's very choppy. Not all markets are the same.”

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